Democrat Jeff Merkley has leapt from Oregon's statehouse to the U.S. Senate, ousting two-term Republican Gordon Smith after an expensive, high-stakes contest that will help shift the balance of power in Washington.

The Oregonian projects that Merkley will squeak by Smith by the time all votes are counted.

Merkley, a five-term state lawmaker and former Habitat for Humanity director, took advantage of a surge of Democratic support to win the bitterly fought battle with Smith, a Pendleton frozen food magnate who also rose from the Oregon Legislature.

Neither candidate was willing to rule the race over until more votes are counted.

"More good news," said Matt Canter, spokesman for Merkley, "but we'll just continue to watch the ballots come in and wait to claim victory."

Smith's campaign manager, Brooks Kochvar, argued vigorously that it is too early to declare a winner.

With more than 80 percent of the vote tallied late Wednesday, Merkley held a lead of more than 4,000 votes. Most of the uncounted votes were cast in counties where voters lean heavily toward Merkley, such as Multnomah and Lane counties.

Merkley's victory capped not only a long, expensive campaign but also an emotional and tense day for both candidates, who were forced to wait out an agonizingly slow vote-counting process.

Merkley spent most of the day at his East Portland home, where out-of-town visitors circulated and the phone rang constantly -- often with other U.S. senators on the other end, wishing him luck and asking for updated vote counts. Merkley spent considerable time in the kitchen, where he keeps his computer.

"I've been going through the numbers about every hour and a half," he said in an afternoon phone interview. He said he ran his own mathematical models and expects to come out "comfortably ahead" when the dust settles.

Smith "optimistic"
Smith did not talk to reporters Wednesday, but his campaign manager said he remains "optimistic" about his chances because of a late Republican surge of voting.

"Look at the increase in Republican turnout," said Brooks Kochvar. Although Democratic voters outpaced Republicans early, the numbers evened up in the final two days, he said. "We feel like the math is there to get it done."

Smith, who spent election night at the Benson Hotel in Portland, packed up his suitcases Wednesday morning and drove his family back to his hometown of Pendleton. Before leaving, he bid emotional farewells to staffers and campaign aides.

Kochvar warned against reading anything into Smith's return home. "Any normal person would want to be home with their family" rather than stuck in a hotel, he said.

At a news conference held in his driveway, Merkley said he expects to become the 57th Democrat in the 100-member Senate, making it easier for President-elect Barack Obama to carry out his agenda.

"This race could be determining whether or not our nation can move forward," Merkley said, citing health care, education, the economy and the war in Iraq as top priorities.

Key numbers
Merkley will join Oregon's senior senator, Ron Wyden, giving Oregon a two-Democrat team for the first time in four decades. Democratic senatorial leaders, who threw millions of dollars into the effort to defeat Smith, were hoping to boost their ranks to 60, which would effectively give them unfettered sway over Congress.

The Oregon contest was one of four that remained in play Wednesday, along with Senate races in Minnesota, Georgia and Alaska. Wyden's chief of staff in Portland, Josh Kardon, said there was heavy anticipation around the country about Oregon's results.

Even though it's unlikely that Democrats will reach their goal of 60, the closer they get, the better, he said. "The ability to defuse Republican filibusters goes up exponentially with 57 votes instead of 56 votes."

Despite the reticence to celebrate, Merkley was clearly in a buoyant mood Wednesday. For most of the day, vote counting showed Smith with a shaky lead. But as more Multnomah County votes were counted, Merkley pulled ahead again for good.

Merkley relished the time at home -- the first full day he has spent with his family in months, he said.

"It felt a little bit like Thanksgiving," he said. "We had family dropping by, people cooking continuously. ... It feels great."

Merkley said he feels especially satisfied given how hard it is to unseat an incumbent in modern politics. It has been more than 40 years since an Oregon Democrat knocked out a sitting Republican senator, he said.

"It takes an enormous sense by citizens that things are way off track and that it's necessary to intervene to change the course," he said. He said he hopes to bring to the Senate the same skills he used as Oregon House speaker during the 2007 legislative session, which has been praised as one of the most productive in years.